Contents of Resolution Plan redrawn, duties of RP redefined

IBBI notifies 3rd amendment to CIRP and Fast Track Regulations

 

08.11.2017

Vallari Dubey

resolution@vinodkothari.com

Introduction

Resolution plans pursuant to Section 30 and Section 31 of the Insolvency and Bankruptcy Code, 2016 (“the Code”) will hereon be required to contain details of the Resolution Applicant along with the Connected Persons.

A time bound corporate insolvency resolution process is linked with good resolution plans that can feasibly protect the Corporate Debtor from the curse of liquidation. With this ideology, IBBI has brought third set of amendments to the CIRP Regulations and Fast Track Regulation of the Code. Read more

Section 14 (1) v. Section 60(2) of the Code: Creditors cannot take action against personal guarantors while on-going CIRP of a Corporate Debtor

By Shreya Routh & Vallari Dubey, (resolution@vinodkothari.com)

Brief facts of the case

Petitioners had filed a writ petition with the Allahabad High Court, challenging the order[1] passed by the Debt Recovery Tribunal (“DRT”). Petitioners are the guarantors of M/s LML Limited, Kanpur (hereinafter referred as the “Company”). The State Bank of India filed an application before the Debt Recovery Tribunal, Allahabad against the Company as the principal borrower and Sanjeev Shriya and others (hereinafter referred to as the “Petitioners”) as the guarantors. On 6.7.2017 DRT heard both the parties and passed the impugned order, staying the proceeding against the Company on the basis of the order passed by NCLT Allahabad dated 30.05.2017 imposing Moratorium on legal proceedings under Section 14 of the Insolvency and Bankruptcy Code, 2016. Subsequent to this, Corporate Insolvency Resolution Process began for the corporate debtor being the Company. As far as the resolution process for the personal guarantors was concerned, the interpretation of Section 60 of the Code provided for admitting such application to NCLT. However, since such provisions are not yet notified, being an individual, initiation of insolvency proceedings were placed before DRT. Read more

IBBI eases norms for setting up of Information Utilities

Chintan Shah

resolution@vinodkothari.com

IBBI had notified the IBBI (Information Utilities) Regulations, 2017 (‘the regulations’) on 31st March, 2017, which shall come into effect immediately. The amendment has been made in line with easing the norms for Information Utilities (“IU”).

Read more

IBBI amends CIRP and FAST Track Regulations: intends to protect interest of stakeholders

09.10.2017

Vallari Dubey

resolution@vinodkothari.com

 

IBBI has amended INSOLVENCY AND BANKRUPTCY BOARD OF INDIA (INSOLVENCY RESOLUTION PROCESS FOR CORPORATE PERSONS) REGULATIONS, 2017[1] (“CIRP Regulations”) and INSOLVENCY AND BANKRUPTCY BOARD OF INDIA (FAST TRACK INSOLVENCY RESOLUTION PROCESS FOR CORPORATE PERSONS) REGULATIONS, 2017[2] (“Fast Track Regulations”) vide its notification dated 5th October, 2017. The same shall be effective immediately.

 

Amendment to CIRP Regulations

Following new sub-regulation (1A) shall be added in Regulation 38:

“(1A) A resolution plan shall include a statement as to how it has dealt with the interests of all stakeholders, including financial creditors and operational creditors, of the corporate debtor.”

 

Amendment to Fast Track Regulations

Following new sub-regulation (1A) shall be added in Regulation 37:

“(1A) A resolution plan shall include a statement as to how it has dealt with the interests of all stakeholders, including financial creditors and operational creditors, of the corporate debtor.”

 

Analysis

Regulation 38[3] pertains to Mandatory contents of the resolution plan. Accordingly, a resolution plan shall have a specified list of disclosures and contents as per the Regulation. A resolution plan for an indebted entity should address the basic criteria of effective payment structure. The idea of the new amendment seems to be to justify as to how a resolution plan is suiting the requirements of the entity and how it is protecting the interests of stakeholders, especially the financial and operational creditors of the corporate person. The new inclusion of sub-regulation (1A) shall ensure greater transparency and increased protection of the interest of stakeholders.

[1] http://www.ibbi.gov.in/CIRP_amndmt_5_oct_2017-10-07_21-32-33.pdf

[2] http://www.ibbi.gov.in/Fast_Track_amndmt_5_oct_2017-10-07_21-31-30.pdf

[3] http://ibbi.gov.in/webadmin/pdf/legalframwork/2017/Sep/Insolvency%20and%20Bankruptcy%20Board%20of%20India%20(Insolvency%20Resolution%20Process%20for%20Corporate%20Persons)%20Regulations,%202016%20(Amended)_2017-09-25%2014:22:35.pdf

TIME LIMIT PRESCRIBED IN IBC- NOT MANDATORY

By Richa Saraf, (legal@vinodkothari.com)

In the case of Surendra Trading Company v. JuggilalKamlapat Jute Mills CO. Ltd. &Ors.[1], the Apex Court was concerned with the correctness of the order passed by the National Company Law Appellate Tribunal (NCLAT) whereby it was held that the time of 7 (Seven) days prescribed in proviso to section 9(5) of the Insolvency and Bankruptcy Code, 2016 (IBC), for admitting or rejecting a petition or initiation of insolvency resolution process, is mandatory in nature and the Hon’ble Supreme Court has set aside part of the impugned judgment of NCLAT. The ruling is broadly discussed below. Read more

Constitutional powers immune of Moratorium under IBC

In the matter of Canara Bank v. Deccan Chronicle Holdings Limited, NCLAT Principal Bench[1]

25.09.2017

Vallari Dubey

resolution@vinodkothari.com

 

Introduction

Ever since the Insolvency and Bankruptcy Code 2016 (IBC 2016) was enacted, its overriding effect during the moratorium became the talk of the corporate town. It was yet to be tested whether the prohibition of any proceedings against the corporate debtor during the moratorium is a prudent step or not. While the cases started flowing in and came few judgments, it was established that the objective of the Code was to revive the entity at its core and not to be seen as another recovery tool. Under the light of such understanding, it was observed that the moratorium period was very much necessary for the corporate debtor so as to evaluate the possible option and ways for revival of the stressed entity. However, this write-up focusses on the recent judgment pronounced by National Company Law Appellate Tribunal (NCLAT) in the matter of Canara Bank vs. Deccan Chronicle Holdings Limited.

Brief facts of the case

In the present case, an application was filed by Canara Bank (hereinafter known as the ‘Appellant’) under Section 7 of the Code against Deccan Chronicle Holdings Limited (hereinafter known as “the Corporate Debtor”), which was admitted by the Hon’ble Hyderabad bench of National Company Law Tribunal (“NCLT”)[2], declaring Moratorium under Section 14 of the Code on 19th day of July, 2017. However, the Appellant was not content with the order of moratorium pronounced as it specifically excluded proceeding before High Court and Supreme Court from the purview of Moratorium.

Main contentions of the Appellant

The Appellant submitted that the Adjudicating Authority cannot exclude any court from the purview of Moratorium for the purpose of recovery of amount or execution of any judgement or decree, including the proceeding, if any, pending before the Hon’ble High Courts and Hon’ble Supreme Court of India against a ‘corporate debtor’.

Relevant extract of Moratorium

Relevant extract of the Moratorium declared by the Hon’ble Bench which is the theme of the matter of discussion is as follows:

XXX

(c) We hereby declared the following Moratorium by prohibiting the following actions: –

  1. The institution of suits or continuation of pending suits or proceedings except before the Hon’ble High Court (s) and Hon’ble Supreme Court of India, against the Corporate Debtor including execution of any judgement, decree or order in any court of law, Tribunal, arbitration panel or other authority;

XXX

Relevant provisions of the Code

Section 14 (1) (a)

XXX

  1. Moratorium – (1) Subject to provisions of sub-sections (2) and (3), on the insolvency commencement date, the Adjudicating Authority shall by order declare moratorium for prohibiting all of the following, namely:—

(a) the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority;

XXX

Findings of the Bench

  • On Section 14 – Section 14(1)(a) does not exclude any Court, including the Hon’ble High Courts or Hon’ble Supreme Court of India.

 

  • Recovery suits in High Courts and Supreme Court – There is no provision to file any money suit or suit for recovery before the Hon’ble Supreme Court except under Article 131 of the Constitution of India where dispute between Government of India and one or more States or between the Government of India and any State or States on one side and one or two or more States is filed. Some High Courts have original jurisdiction to entertain the suits, which may include money suit or suit for recovery of money.

 

  • Certain Powers of High Courts and Supreme Court – The Hon’ble Supreme Court has power under Article 32 of the Constitution of India and Hon’ble High Court under Article 226 of Constitution of India which cannot be curtailed by any provision of an Act or a Court.

Judgment passed by the Hon’ble Bench

In view of the above observations, ‘Moratorium’ will not affect any suit or case pending before the Hon’ble Supreme Court under Article 32 of the Constitution of India or where an order is passed under Article 136 of Constitution of India. ‘Moratorium’ will also not affect the power of the High Court under Article 226 of Constitution of India.

However, so far as suit, if filed before any High Court under original jurisdiction which is a money suit or suit for recovery, against the ‘corporate debtor’ such suit cannot proceed after declaration of ‘moratorium, under Section 14 of the I&B Code.

The Hon’ble Bench of NCLAT disposed of the matter by clarifying the language of Moratorium (supra) as declared in the above case, without suggesting any changes therein and neither rejecting nor accepting the appeal filed by the appellant.

Our Analysis

There are few important points of discussion that can be highlighted by this judgment, discussed briefly below:

  • Moratorium declared is within the constitutional ambit of the Code. The Code is a Central Act, passed by the parliament by exercising the powers granted under the Constitution of India.

 

  • There are certain powers directly bestowed upon the High Courts and the Supreme Court of India by the Constitution of India. Such powers with the respective judiciary bodies are immune of any provision of any law in the Country, be it Central law or State law.

 

  • Article 32 gives power to Supreme Court to issue directions, writs or orders with respect to right to constitutional remedy.

 

  • Article 226 gives power to High Courts to issue writs for enforcement of rights given under Part III of the Constitution of India.

 

  • Article 136 of the Constitution deals with the power to allow a special leave to appeal to person who files an application under this article.

 

  • All the above mentioned powers are exclusive to the two judiciary bodies and therefore Moratorium under the Code shall not affect such powers.

 

  • However, even if the Moratorium as declared in this case excludes suits or proceedings with High Courts, the exclusion does not extend to suits or proceedings with a High Court under original jurisdiction where the suits pertains to recovery of money and therefore will be affected by the period of Moratorium.

 

  • Moratorium is a legal right for the benefit of both the Corporate Debtor and the Creditor and also the judiciary to put a temporary hold/stay on everything else and deal with the case in hand, ceteris paribus. The right is however, bestowed by a Central Act; Few powers that are rested upon top two highest judiciary bodies in the country by the supreme law, are untouched of any other right under any other law in the country including the Moratorium period under the Code.

Impact of Judgment and Conclusion

Moratorium is a stay on any action being taken against the Corporate Debtor. On one side, the judgment clarifies the supreme powers of the Supreme Court and High Courts and on the other side, adds more clarity to provisions of Section 14 of the Code. Interestingly, the provisions of Section 14 do not provide any exceptions to Moratorium, as clarified by the judgment in the given case.

NCLT being a quasi-judicial body, formed under an Act of Parliament, cannot override the constitutional powers resting with the Apex judiciary.

[1] http://nclat.nic.in/final_orders/Principal_Bench/2017/insolvency/14092017AT1472017.pdf

[2] http://nclt.gov.in/interim_orders/hyderabad/19.07.2017/1.pdf

First Information Utility set up under IBC

National E-Governance Services Ltd. receives final nod from IBBI Vallari Dubey resolution@vinodkothari.com   The Insolvency and Bankruptcy Board of India (“IBBI”) has granted the final approval to National e-Governance Services Ltd. (NeSL), allowing it to become the first information utility (“IU”) under the Insolvency and Bankruptcy Code, 2016 (“the Code”). Earlier in June, 2017, IBBI […]

DECIPHERING “DISPUTE” IN INSOLVENCY AND BANKRUPTCY CODE

By Richa Saraf, (legal@vinodkothari.com)

-Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd.[1]

The Supreme Court of India has provided a much required clarity on the provisions of Insolvency and Bankruptcy Code, 2016 (IBC) vis-à-vis the existence of dispute. In this article, we broadly discuss the various issues that were dealt with in the judgment.

BRIEF FACTS OF THE CASE:

Mobilox Innovations Pvt. Ltd. (hereinafter referred to as “Appellant” or “Corporate Debtor”) was engaged by Star TV for conducting tele-voting for the “Nach Baliye” program on Star TV, who in turn subcontracted the work to the Kirusa Software Pvt. Ltd. (Respondent). A Non-Disclosure Agreement (NDA) was also executed between the parties in this regard. Read more

Plight of a Power of Attorney Holder Vis-À-Vis Insolvency Proceedings

By Richa Saraf, (legal@vinodkothari.com)

Palogix Infrastructure Pvt. Ltd. v. ICICI Bank Ltd.[1]

The Hon’ble National Company Law Appellate Tribunal (NCLAT) has held that ‘Power of Attorney’ holders are not authorized to present Insolvency Application under Section 7, 9 and 10 of the Insolvency and Bankruptcy Code, 2016 (IBC). It is only authorized representatives, duly authorized by Board Resolution, who are authorized to present the same. The same is based on a simple rationale that company being juristic person only acts through its Board of Directors, who can exercise all powers which company is entitled to and they may vide resolution authorize any person to present application. Further, officers authorized by Board cannot give Power of Attorney to any other person. Below, we discuss the ruling. Read more

CONSTITUTIONAL VALIDITY OF INSOLVENCY AND BANKRUPTCY CODE

By Richa Saraf, (legal@vinodkothari.com)

A writ petition has been filed in the Madras High Court, by Southern Polypet Private Limited, wherein the petitioner has challenged the Insolvency and Bankruptcy Code, 2016 (Code) as being contrary to the provisions of the Constitution of India and the Hon’ble High Court comprising Chief Justice Indira Banerjee and Justice M. Sundar has issued a notice with respect to this petition. Read more